Q1 GDP growth in line, scanty rain to hit Q2, Q3: Economists
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Last Updated: Monday, August 31, 2009, 23:59
  
New Delhi: India's first-quarter growth of 6.1 per cent, highest since the global crisis touched shores last September, hasn't surprised economists who kept their full-year outlook few shades lower than the government's.

The government has kept the growth outlook at 6 per cent for the current fiscal with an upward bias despite deficient monsoon. However, economists say growth in following quarters would not be over 6 per cent due to scanty rainfall.

"Growth was largely in line with ours as well as consensus forecasts," Citi India said in a research note today keeping its FY'10 GDP estimate of 5.8 per cent citing "still unclear" drought impact on the winter crop.

While agricultural growth was up 2.4 per cent, the negative effect of a poor monsoon (278 out of India’s 593 districts are now drought-hit) and its impact on the summer crop will be felt in the second and third quarter, it said.

The global economic conditions have finally stabilized, as reflected in the GDP numbers recently released around the world, but India’s battle against downside risks is far from over, Moody's Economy.com, the research arm of Moody's said.

"The drag from exports and foreign investment may have moderated or even ended, but the drought has emerged as a new major challenge in India ... agricultural output is bound to tumble in the coming months on a year-ago basis," it said.

Goldman Sachs, which expected April-June GDP growth of 6.3 per cent, also maintained its FY'10 GDP growth forecast at 5.8 per cent saying that deficient rainfall could reduce agricultural growth to minus 2 per cent year on year for FY'10.

"The next two quarters may see lower growth than 6.1 per cent in this quarter as the impact of poor rains comes on board," it said, adding the economy continues to have significant pent-up demand for investment, especially in infrastructure and in affordable housing.

Bureau Report


First Published: Monday, August 31, 2009, 23:59


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